AFAIK, if one of the drives fail, the array will enter into recovery mode, and try recreating the data on the failed mirror. Whatever the case, RAID arrays represent additional reliability problems, so I would suggest you practice backup religiously if you decide to go the RAID 1 route.
If one of your RAID 1 disks fails, the array is still online, because the OTHER RAID disk is still OK. That is the point of RAID 1 - 2 copies of the data appearing as 1 logical drive (say, C drive for simplicity). Your C drive is still there as far as the computer is concerned.
r_manic, not sure what you mean by the RAID array representing "additional reliability problems". If your data is important, you should back it up regardless of RAID, but RAID 1 gives you a bit more, not less, reliability. Recovery mode does not take the drive offline, at least with the hardware arrays I've worked with. It could impact performance some during the rebuild.